Performance audit, Department of Administration, sunset factors

PERFORMANCE AUDIT
DEPARTMENT OF ADMINISTRATION
SUNSET FACTORS
Report to the Arizona Legislature
By the Auditor General
November 1995
Report # 95- 12
DOUGLAS R. NORTON, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
November 15,1995
DEBRA K. DAVENPORT, CPA
DEPUTY AUDITOR O E N E I I I
Members of the Arizona Legislature
The Honorable Fife Symington, Governor
Mr. Rudy Serino, Director
Arizona Department of Administration
Transmitted herewith are the Sunset Factors for the Department of Administration. This
report summarizes and presents information from the six performance audits conducted on
the Department along with specific information provided by the Department These factors
are presented in response to the requirements of A. R. S. 541- 2954, which direct the
Legislature to consider whether the Department of Administration should be continued or
terminated.
My staff and I will be pleased to discuss or clarify items in the report
Tlus report will be released to the public on November 16, 1995.
Sincerely,
f*?~!!! D ugl s . Norton
Enclosure
2910 NORTH 44TH STREET . SUITE 410 . PHOENIX, ARIZONA 85018 ( 602) 553- 0333 FAX ( 602) 553- 0051
Table of Contents
Paqe
Introduction and Background ............................................................. 1
Sunset Factors ................................................................................. 5
Agency Response
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has prepared sunset factors for the Department of Ad-ministration
( DOA) in response to a December 13,1991, resolution of the Joint Legislative
Oversight Committee, and a May 5,1993, resolution of the Joint Legislative Audit Com-mittee.
These sunset factors were prepared as a part of the sunset review set forth in
Arizona Revised Statutes ( A. R. S.) 5541- 2951 through 41- 2957.
The Department of Administration was established in 1972 for the purpose of providing
centralized support services to state government. The 1972 legislation merged the De-partment
of Library and Archives, the Department of Public Building Maintenance, the
Department of Finance, the State Surplus Property Agency, the State Personnel Commis-sion,
the Board of History and Archives, and the Historical Advisory Commission into
one agency - the DOA. Although the DOA has been reorganized over the years, the
types of centralized services it provides have remained relatively consistent.
Organization
Today, the DOA provides support services in the areas of automation, finance, personnel
administration, public buildings maintenance, surplus property, and risk management.
Under the direction of a director and deputy director, the DOA is currently organized
into five divisions:
General Services Division - This Division's major responsibilities include manag-ing
and maintaining state- owned buildings, operating the State's print shop, fleet
management office, and surplus property program, and providing design and con-struction
services for state construction projects.
Information Services Division - This Division operates an Information Processing
Center that provides operations support to state agencies that use mainframe and mini-computers.
It also designs and develops computer applications and tracks trends and
opportunities in new technologies. This Division is also responsible for coordinating
statewide information technology and telecommunications.
Financial Services Division - This Division has several diverse responsibilities in-cluding
maintaining the statewide automated financial system, conducting and main-taining
statewide payroll, developing and maintaining statewide procurement poli-cies
and procedures, and providing procurement services. In addition, the Division
administers the State's risk management program.
W Personnel Services Division - This Division provides personnel management and
consultation services through on- site personnel offices at some larger agencies and
serves the remaining 86 state agencies at its Capitol Mall Personnel Office ( CA. M. P.).
It also administers the State's employee benefit plans, and recruits, evaluates, and
refers job candidates to state agencies for employment consideration.
W Management Services Division - This Division provides accounting and purchas-ing
services for the DOA. It is also responsible for preparing the DOA's annual budget
request, and monitoring this budget. Further responsibilities include administering
the travel reduction and rideshare programs, operating the Arizona Office for Ameri-cans
with Disabilities, and assisting the Governor's Regulatory Review Council.
Staffing and Budget
The DOA has nearly 1,100 full- time equivalent ( FTE) positions to provide the services
outlined above. In fiscal year 1995, the DOA received an estimated $ 348,039,800 from
both appropriated and nonappropriated funds. Only a small percentage of the DOA's
annual funding, approximately 7 percent, comes from General Fund appropriations.
Additional revenue, approximately 25 percent, is from other appropriated funds such as
the Personnel Fund, the Risk Management Revolving Fund, and the Automation Fund.
Finally, the DOA receives approximately 68 percent of its funding from nonappropriated
funds. The DOA has 14 nonappropriated funds which include, among others, the Motor
Pool Revolving Fund, the Special Employee Health Insurance Trust Fund, the Surplus
Property Fund, and the Telecommunications Fund.
Scope of Current Audits
The current series of audits was conducted as a sunset review of the Department of Ad-ministration
under the direction of the former Joint Legislative Oversight Committee and
the Joint Legislative Audit Committee. The following five reports discuss the six audits
that were completed as a part of this review.
W The Personnel Division ( Performance Audit Report 93- 6) - This report focuses on
the services provided by the Department's Personnel Division. Our review identified
numerous problems with the manner in which personnel services are provided. In the
most important service areas - hiring, classification, compensation, and benefits -
our report indicated that Arizona's current personnel system does not respond to its
users' needs, and must be reformed.
The Building and Planning Services Section and Construction Services Section ( Per-formance
Audit Report 93- 9) - This report centers on two sections within the General
Services Division. These two sections provide several building oversight, planning,
and construction management services. Our review found that a lack of funding and
inefficient management have rendered many state buildings in need of major repair.
Further, our review identified the need for the DOA to improve services to agencies
involved in relocations.
H The General Services Division ( Performance Audit Report 94- 5) - This report con-tains
information from two separate audits that were combined for reporting pur-poses.
This audit reviews the Tenant Services Office and the Fleet Management Office
( Motor Pool) within the General Services Division. Although the DOA serves directly
as the property manager for $ 177 million worth of property, it has almost no preven-tative
maintenance programs. DOA also pays too much and receives too little for cus-todial
services. Finally, DOA does not link its rental rates to the cost of operating its
buildings.
Our work in the Fleet Management Office identified that management of the state
vehicle fleet is fragmented. Over 80 percent of the State's vehicle fleet is outside of
DOA's control. In addition, the taxi fleet is often not used cost- effectively.
H The Financial Services Division ( Performance Audit Report 95- 11) - This report
reviews the General Accounting Office, and the Risk Management Section.(') Our re-view
of the General Accounting Office found that because of inadequacies with the
uniform statewide accounting system ( USAS), public monies are vulnerable to impro-prieties.
Moreover, USAS currently does not meet Arizona's financial management
needs. Further, the report identified the need for a Chief Financial Officer to ensure
strong financial management in the State. Our review of the Risk Management Section's
Property and Liability Unit identified numerous claims management problems that
expose the State to unnecessary expenditures and limit the Risk Management Section's
ability to adequately safeguard state monies set aside for the risk management pro-gram.
Further, our report identified the need for the Risk Management Section to pro-vide
agencies with stronger incentives to control loss costs and exposures through the
use of deductibles and premium credits.
H The Information Services Division ( Performance Audit Report 95- 9) - This report
focuses on the DOA's Information Services Division ( ISD). Our review indicated that
despite spending nearly $ 200 million annually on information resources, Arizona has
no central authority managing this important investment. Further, the State does not
invest in technology resources with statewide priorities, benefits, and long- term costs
in mind. Specific to ISD's operational effectiveness, ISD has made limited efforts to
(') We did not review the State Procurement Office ( SPO). During our audit the SPO had completed a
study of its operations that recommends substantial change to its processes. Given the magnitude of
expected changes in that Office, we did not believe it would be cost- effective to conduct a review at
this time.
provide newer technology services to its customers due to its dependence on older
technology revenues ( i. e., fees generated from use of mainframe computers). Finally,
ISD's services lack a customer focus and are inadequately planned.
This report addresses the 12 statutory sunset factors. In addressing these factors, we use
information from the current series of audits as well as information provided by the De-partment.
This information is summarized and presented in the various sunset factors, as
appropriate.
This audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to the Director and staff of the De-partment
of Administration for their cooperation and assistance throughout all the au-dits.
FACTORS
In accordance with A. R. S. 541- 2954! the Legislature should consider the following 12 fac-tors
in determining whether the Department of Administration should be continued or
terminated.
1. The objective and purpose in establishing the Department.
The Department of Administration ( DOA) was created by the Legislature in 1972
per A. R. S. 541- 701 by merging seven previously established agencies to provide
more centralized support services to state government. Some of the original ser-vices
provided by the DOA, such as library and archives, have since been removed.
Additionally, services such as risk management and automation have subsequently
been added. Currently, as stated in statute, the DOA provides support services in
the areas of automation, finance, personnel administration, public buildings main-tenance,
surplus property, and risk management. While the type of services of-fered
has remained fairly consistent, the DOA has recently changed its focus. De-partment
officials state the DOA " has evolved from a control focused organization
to one that is customer- service driven." This change is reflected in the DOA's cur-rent
vision, mission, and values statements. For example, the DOA mission state-ment
reads:
" To provide high quality support services to governnzent agencies, the public,
and state enlployees to enhance our customers' ability to achieve their goals."
2. The effectiveness with which the Department has met its objective and purpose
and the efficiency with which it has operated.
The Department measures its effectiveness and efficiency by conducting customer
satisfaction surveys, and by using performance standards, benchmarks, and cost
comparisons. The DOA feels, in large part, that it has been successful in meeting its
objectives. For example, in 1994 the DOA issued a customer satisfaction survey
focusing on 70 services it provides to state agencies. Respondents of this survey
indicated that with the exception of one activity ( Flag Administration), all of the 70
services were important. However, respondents further indicated they were dis-satisfied
with 20 of the 70 services, suggesting room for further improvement.
DOA states that financial resource issues such as lagging pay rates, lack of funding
in automation, and physical plant limitations have adversely impacted its efficiency.
Our reviews also identify several areas where the DOA can improve its effective-ness
and efficiency in fulfilling its statutory responsibilities. For example:
Our audit work in the Personnel Division indicated that the Department falls
far short in fulfilling its responsibilities in the areas of hiring, classification,
compensation, and benefits ( Performance Audit Report 93- 6).
Our review of the Building and Planning Services and Construction Services
Sections indicated that a lack of funding and inefficient management have ren-dered
many state buildings in need of major repairs and that the DOA can
improve its handling of agency relocations ( Performance Audit Report 93- 9).
Our review of the General Services Division found that although the DOA serves
directly as the property manager for $ 177 million worth of property, it has al-most
no preventative maintenance programs, pays too much and receives too
little for custodial services, and does not link its rental rates to the cost of oper-ating
its buildings. Our work also indicated that management of the State's
vehicle fleet is fragmented and the taxi fleet is often not used cost- effectively
( Performance Audit Report 94- 5).
In our most recent audits the need for strong financial management, improved
property and liability claims management, and statewide direction over infor-mation
technology expenditures was identified ( Performance Audit Reports
95- 11, and 95- 9).
The extent to which the Department has operated within the public interest.
Although the Department's operations primarily affect state agencies and employ-ees,
some areas such as personnel administration, public building maintenance,
risk management, and procurement can indirectly impact the general public. For
example, if rendered properly, the DOA operates in the public's interest by per-forming
the following functions:
Hiring qualified personnel who in many instances provide direct services to
taxpayers;
Maintaining the State's buildings and grounds;
Providing risk management services designed to prevent or reduce losses; and
Achieving savings through cost- effective procurement of goods and services.
4. The extent to which rules and regulations promulgated by the Department are
consistent with the legislative mandate.
The DOA feels it has sufficient authority to promulgate rules and regulations. Fur-ther,
it believes that all the necessary rules have been promulgated with the excep-tion
of some automation rules which are in process. The DOA states that it is cur-rently
developing several information resource management ( IRM) policies and
technology standards. However, to ensure the DOA's rules and regulations are
consistent with the legislative mandate, our reviews suggest the need to revise or
develop additional rules in the following areas:
W The Risk Management Section ( RMS) should consider increasing its use of
deductibles and implementing premium credits to help increase agencies' ef-forts
to control loss costs and exposures. The State currently has a $ 100 disap-pearing
deductible.(') If the RMS increases the amount of the deductible, it would
need to revise rule R2- 10- 106 ( Audit Report 95- 11); and
The DOA Personnel Division should begin a comprehensive reform of the
state hiring system, including redrafting the personnel rules. Our report states
major rule revision is needed because some of these rules limit the State's abil-ity
to respond creatively to its diverse hiring needs. For example, the personnel
rules require that applicants must be state residents and hiring lists are limited
to seven candidates ( Performance Audit Report 93- 6).
While the DOA has made several changes to its personnel rules, these changes are
not extensive enough to address the concerns noted in our report. For example,
the DOA has revised at least 17 rules since July 1994. However, these revisions
deal with issues such as including parents in the family group for which an em-ployee
may use accrued sick leave, lowering the number of hours of suspension
for which a grievance can be filed, and broadening the categories of " relative" for
which an employee may take bereavement leave. These rule revisions, although
most assuredly important, do not consider the more significant issue of allowing
agencies the flexibility to respond to their diverse hiring needs.
Under the $ 100 disappearing " deductible," the agency covers any property losses up to $ 100. When
a loss exceeds $ 100 ( even $ 101), the deductible disappears and the RMS pays for the entire claim.
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5. The extent to which the Department has encouraged input from the public be-fore
promulgating its rules and regulations and the extent to which it has in-formed
the public as to its actions and their expected impact on the public.
Documentation provided by the DOA shows that it informs the public of its pro-posed
rules by filing notice with the Secretary of State, publishing a notice in the
Arizona Administrative Register, sending copies of proposed rules to all agency heads,
and holding public hearings at various locations throughout the State. Further, the
DOA communicates its activities through various publications, such as quarterly
newsletters and pamphlets. For example, the Information Services Division pub-lishes
a quarterly newsletter - Info Trends, and the Management Services Division
publishes pamphlets on Capitol Rideshare.
6. The extent to which the Department has been able to investigate and resolve
complaints that are within its jurisdiction.
Because the DOA is not a regulatory agency, this factor does not apply.
7. The extent to which the Attorney General or any other applicable agency of
state government has the authority to prosecute actions under enabling legisla-tion.
This factor does not apply to the DOA because it is not a regulatory agency.
8. The extent to which the Department has addressed deficiencies in the enabling
statutes which prevent it from fulfilling its statutory mandate.
The DOA has proposed approximately 24 pieces of legislation over the last 5 years.
For example, the Department has proposed legislation dealing with flexible work
hours, health insurance premiums, risk management insurance, state employees'
travel authorizations, and procurement evaluator disclosure statements. Examples
of recently enacted legislation include:
SB 1033 - Public Employees - Out- of- State Travel - Policies and Procedures
( 1994). This legislation amends A. R. S. 538- 626 allowing agency heads or uni-versity
presidents to countersign out- of- state travel orders rather than the Gov-ernor.
It also directs the DOA to adopt policies and procedures dealing with
the approval of out- of- state travel orders, and to disseminate and perform com-pliance
reviews of these policies.
SB 1156 - Arizona Procurement - Less Than $ 10,000, Construction Contract
Exemption, and Simplified Construction Procurement Program - Effective
Dates ( 1995). This 1995 legislation extends the applicability of laws 1993, Chap-ter
135, section 7 and 8 until 1997. Prior to the 1993 legislation, all procurements
in excess of $ 10,000 required formal bidding procedures. Currently, the thresh-old
is $ 25,000.
9. The extent to which changes are necessary in the laws of the Department to
adequately comply with the factors listed in the sunset laws.
The DOA does not believe any changes in its laws are necessary. However, our
reviews found the following statutory changes are needed to achieve a more effec-tive
hiring system:
The DOA may need to revise A. R. S. 541- 783.5 to allow it the ability to list can-didates
for state employment ( when it is more efficient or valid) as either " quali-fied
or " unqualified" rather than " in order of relative excellence."
The DOA may need to revise A. R. S. 538- 492 which requires the awarding of
preference points to veterans and handicapped candidates. This statute may be
adversely impacting State Affirmative Action goals and workforce diversity by
causing many hiring lists to be dominated by veterans.
Finally, additional legislation is needed to ensure the Personnel Board is subject to
a sunset review. During our review of the DOA Personnel Division, it was discov-ered
that the State Personnel Board was not encompassed in the DOA's sunset
review because it is a separate agency from the DOA. It was also learned, however,
that the Personnel Board, which hears and reviews appeals relating to personnel
actions, does not have a sunset date. Because the Personnel Board plays an impor-tant
role in the State's personnel system by hearing appeals of disciplinary actions,
additional legislation is needed to ensure this board is reviewed in the future.
10. The extent to which the termination of the Department would significantly harm
the public health, safety or welfare.
Termination of the Department could harm state employees and the public due to
the disruption of the many centralized services the DOA provides. For example,
state employees and vendors would not be paid, many of the State's buildings and
grounds would not be cleaned or maintained, and the State would be without
property, liability, and workers' compensation insurance. While many of the DOA's
functions could be performed separately by each agency, it may not be efficient or
cost- effective to operate in that manner.
11. The extent to which the level of regulation exercised by the Department is ap-propriate
and whether less or more stringent levels of regulation would be ap-propriate.
Because the DOA is not a regulatory agency this factor is not applicable.
12. The extent to which the Department has used private contractors in the peifor-mance
of its duties and how effective use of private contractors could be ac-complished.
The DOA utilizes private contractors in some areas as it believes certain private
sector services are more cost- effective. For example, it contracts with private ven-dors
for certain automotive repairs, specialized claims adjusting needs, and for
consulting in employee compensation and benefits. Because the private sector of-fers
many comparable services, the DOA will need to continuously assess the cost-effectiveness
of these outside services. For example, in the DOA General Services
audit, our review found the DOA could save nearly $ 700,000 annually by contract-ing
with the private sector for custodial services alone. The DOA is currently study-ing
this recommendation. Additionally, our Information Services Division ( ISD)
Report recommends that ISD analyze the economic viability of the services it pro-vides
and consider the possibility of outsourcing some services to the private sec-tor.
Agency Response
I FIFE SYMINGTON
Governor m
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RUDY SERJNO
Director
ARIZONA DEPARTMENT OF ADMINISTRATION
OFFICE OF THE DIRECTOR
1700 WEST WASHINGTON ROOM 601
PHOENIX, ARIZONA 85007
October 30, 1995
Mr. Douglas Norton
Auditor General
2910 N. 44th Street, Suite 410
Phoenix, Arizona 85018
Dear Mr. Norton:
We have received the October 4, 1995, draft sunset audit of
the Department of Administration and have reviewed your
comments with interest.
We are taking this opportunity to provide you with an update
regarding progress and activities in the areas of General
Services ( 93- 9 and 94- 5) as well as Human Resources ( formerly
Personnel, 93- 6).
On behalf of our agency, I would like to thank you for your
cooperation during these audits.
Sincerely,
Rudy Serino
Director
Enclosures
ENCLOSURE A
I. Human Resources Section ( 93- 6)
AUDITOR GENERAL COMMENTS:
" Our audit work in the Personnel Division indicated that the Department falls far short in fulfilling
its responsibilities in the areas of hiring, classification, compensation, and benefits."
ADOA RESPONSE:
One of our first steps was the completion of a five- year strategic plan which was used as a guide in
making some of the changes we have implemented, including changes in the hiring system,
classification, compensation, and benefits areas. The changes implemented over the past two years
include:
A. Hiring
The successful partnering relationships with six agencies for staffing and employment
functions. These partnerships formed the basis for open communication and involvement
by agencies to a greater extent than before, as well as providing the Division with important
lessons in the development of our new hiring process.
The establishment of a Job Service link to improve communication and provide applicants
with better access to the state service system through the services and resources of the
Department of Economic Security's Job Service Offices statewide.
The development of a method for applicants to file for multiple jobs on a single application
form, a change from the previous requirement for an application for each position.
The significant reduction of turnaround time for production of hiring lists.
B . Classification
The classification project is well underway and will result in the recommended
implementation of a new classification system for state service. The development of
classification descriptions is almost completed, the external market survey has been
completed and funding and implementation options are being developed. The report and
recommendation will be included in the Annual Recommendation to the Legislature on
1213 1195.
C . Compensation
The implementation of changes suggested by the Auditor General and others in last year's
Annual Recommendation, including an expanded information base, comparison of the
average state salary to the market, employee distribution by grade, total compensation, and
a state compensation philosophy.
• The expansion of the Joint Governmental Salary Survey ( JGSS) to include more state jobs
and more survey participants to provide broader scope and a broader base.
D. Benefits
• The formulation of the Employee Benefits Advisory Committee ( EBAC) was in the early
stages of development two years age. Since that time, the EBAC has met monthly and has
taken an active role in helping us formulate the state's benefits package.
• The provision of the opportunity to review and comment on proposals for new or enhanced
benefits to the legislative benefits Oversight Committee.
• The monitoring of claims experience for all carriers and continuous seeking of employee
input on their satisfaction level through Pulse Taker surveys.
• The installation of Benefits Information Tracking System ( BITS), allowing us to track and
monitor employee participation and reduce unnecessary losses to the state.
• The mailing of an annual benefits statement to each employee. The first statement was
issued in early 1994, the second in early 1995, and we plan to continue providing
employees with this important information.
a The issuance of a monthly newsletter, For Your Health and Benefit, to all employees.
AUDITOR GENERAL COMMENTS:
". . . To ensure the DOA's rules and regulations are consistent with the legislative mandate, our
reviews suggest the need to revise or develop additional rules in the following areas:
The DOA Personnel Division should begin a comprehensive reform of the state hiring system,
including redrafting the personnel rules. Our report states major rule revision is needed because
some of these rules limit the State's ability to respond creatively to its diverse hiring needs. For
example, the personnel rules require that applicants must be state residents and hiring lists are
limited to seven candidates.
While the DOA has made several changes to its personnel rules, these changes are not extensive
enough to address the concerns noted in our report. For example, the DOA has revised at least 17
rules since July 1994. However, these revisions deal with issues such as including parents in the
family group for which an employee may use accrued sick leave, lowering the number of hours of
suspension for which a grievance can be filed, and broadening the categories of " relative" for
which an employee may take bereavement leave. These rule revisions, although most assuredly
important, do not consider the more significant issue of allowing agencies the flexibility to respond
to their diverse hiring needs."
ADOA RESPONSE:
The Auditor General recommended certain changes to the Personnel Rules, addressed below:
• Rule R2- 5- 303: The requirement that the salaries of current employees " performing in the
same job class" be raised when an employee received a special entrance rate or special
promotion rate was removed, effective September 15, 1994.
The Personnel Rules applicable to the three issues listed below, along with other rules
applicable to employment issues, are under review and will be part of a future package of
rule changes anticipated for submission in early 1996.
- Rule R2- 5- 203. B. ( residency requirement): The State Service system was designed
to provide employment opportunities for Arizona residents. However, residency
waivers have been and continue to be granted upon agency request.
- Rule R2- 5- 204 ( registers): The decision whether to fill a vacant position through an
internal promotion or outside recruitment is a decision that can be made at the
supervisor, management or agency head level. Some agencies have opted to
develop and use internal registers because it was felt such registers would provide
faster recruitment. When internal promotions are handled under the Resumix
system, internal promotional lists will be provided as quickly as external lists
( within three working days).
- Rule R2- 5- 205 ( certification and selection): As a result of Resumix, the seven
candidate limit has been expanded.
• Rule R2- 5- 304 ( examinations): Human Resources partnered with state agencies to provide
delegated authority for a wide range of employment functions, based on the agency's
ability to staff the functions, including candidate evaluations. Other candidate evaluations
are permitted as long as such evaluations are job related and meet the Uniform Guidelines.
No rule change is considered necessary in this area.
The Auditor General also recommended two statutory changes, addressed below:
A. R. S. 41- 783.5, requiring the listing of candidates in order of relative qualifications: The
Auditor General recommended that an option of issuing lists indicating candidates were
" qualified" or " unqualified" be available. We do not see the advantage of or need to include
" unqualified" candidates on hiring lists. Under Resumix, we provide lists of candidates in
order of relative qualifications under the criteria defined by the hiring agency. The system
allows hiring supervisors the flexibility of defining " the ideal candidate" from a pool of
qualified candidates.
a A. R. S. 38- 492, awarding of preference points to veterans and handicapped candidates:
With respect to the possible negative impact on Affirmative Action, we have not found that
the application of these preference points has had such an impact. Under Resumix, we
continue to apply veterans' and handicapped preference points. Should there be further
desire to explore changing the statutory requirements for application of preference points,
we feel that this public policy issue should be addressed by the legislative body.
ENCLOSURE B
I. The Building and Planning Services Section and Construction Services
Section ( Performance Audit Report 93- 9):
AUDITOR GENERAL COMMENTS:
" This report centers on two sections within the General Services Division. These two sections
provide several building oversight, planning and construction management services. Our review
found that a lack of funding and inefficient management have rendered many state buildings in
need of major repair. Further, our review identified the need for the DOA to improve services to
agencies involved in relocations."
ADOA RESPONSE:
A. "... a lack of funding and inefficient management have rendered many state
buildings in need of major repair ..."
ADOA has made the need for full funding of the Building Renewal Program for the ADOA
Building System a high priority. In fact, this issue has been placed as the # 1 priority in the State
Capital Improvement Plan for the last five years and major education efforts have been made to
JLBC and OSPB budget staffs. The results have been a significant increase in program
appropriations for the past three years as evidenced below:
In an effort to improve the management of the building system, the Building and Planning Services
Section has reorganized to include building inspections, construction contract review and the
building renewal program management. Additionally, we have categorized the building needs into
six major areas for funding allocations from the building renewal program. These major areas, in
order of importance are:
Fire and life safety issues
Building roofing and weatherproofing
Projects critical to continued operations and code compliance
Projects that reduce operating costs
Building finishes
Other
All agency building renewal project requests are evaluated based upon its level of importance with
respect to the six major prioritized categories. This new management philosophy stresses the need
to provide safety, maintain weatherized facilities, replacelrepair deteriorated facility components,
correct code deficiencies, reduce operating costs where economically feasible, provide attractive
facilities and arrange to quickly deal with emergencies as they arise. This allows ADOA to utilize
the annual Building Renewal appropriation in the best manner possible, regardless of funding
levels. JLBC and OSPB have both endorsed this approach.
Since the receipt of the Auditor General's Report 93- 9, the Building and Planning Services Section
has maintained all building renewal projects in a database by agency, amount and facility so that
future requests could be reviewed with respect to past projects. This is a continuous process and
the project status is updated monthly. A project folder is established for each building renewal
project and progress reports are requested from agencies on a quarterly basis until the project is
completed. This information is shared with OSPB and JLBC quarterly.
ADOA building inspectors are instructed to inspect ADOA building system facilities with the intent
of identifying deficiencies and solutions. All building inspections are sent to the respective
agencies with a recommendation for correction. The building inspection form has been modified to
include the identification of building renewal needs. Additionally, copies of the inspection reports
are reviewed and maintained by the Building and Planning Services staff to assist in the
determination of building renewal allocations.
When building renewal project requests are reviewed, a building inspector may be used to perform
a current evaluation of an agency's request, if current information is not informative.
B. " ... DOA to improve services to agencies involved in relocations ..."
The Building and Planning Services Section has undertaken an aggressive customer service
approach to agency relocations. An up front personal contact is made with each agency to asses
the feasibility of the move, responsibilities, coordination and move dates. A checklist has been
revised for better coordination and understanding by the agencies. Continuous communications
with the agency officials is maintained by this section. After the move is completed, a survey is
done to evaluate the customer's satisfaction and the performance of the ADOA staff. Each survey
is reviewed for items that can be improved upon and implemented in the relocation program.
11. The General Services Division ( Performance Audit 94- 5)
AUDITOR GENERAL COMMENTS:
" This report contains information from two separate audits that were combined for reporting
purposes. This audit reviews the Tenant Services Office and the Fleet Management Office ( Motor
Pool) within the General Services Division. Although the DOA serves directly as the property
manager for $ 177 million worth of property, it has almost no preventative maintenance programs.
DOA also pays too much and receives too little for custodial services. Finally, DOA does not link
its rental rates to the cost of operating its buildings.
Our work in the Fleet Management Office identified that management of the state vehicle fleet is
fragmented. Over 80% of the State's vehicle fleet is outside of DOA's control. In addition, the
taxi fleet is often not used cost- effectively."
ADOA RESPONSE:
A. "... DOA has almost no preventative maintenance programs ..."
The Department realizes the necessity of having preventative maintenance programs and has begun
efforts to implement them. A Pilot Preventative Maintenance Program for buildings within the
Capitol Complex was developed but funding for the pilot was denied in the FY96 budget.
Therefore, the pilot has not yet begun. DOA is currently performing some preventative
maintenance on the equipment and buildings within the existing budget and staffing levels. Our
efforts to implement preventative maintenance programs for the state's buildings and equipment
include:
The Maintenance Unit is currently performing preventative maintenance on emergency and
major safety systems. However, it should be noted that the funding and manpower are not
available to perform additional preventative maintenance to meet manufacturer's, state
inspectors' or federal specifications.
a The Maintenance Unit implemented an inventory program to identify all electrical panels,
sump pumps, and emergency generators installed in the ADOA managed buildings. The
inventory of the plumbing fixtures, light fixtures, sprinkler systems and other systems will
be completed by 61301' 96.
a The Maintenance Unit is in the final stages of implementing a comprehensive work order
system that will track the completed preventative maintenance, labor costs and equipment
costs incurred. This system will be compled by 6130196. The current work order system is
not sophisticated enough to track this information. . The HVAC Unit is in the process of identifying all the HVAC systems and equipment
installed in the DOA- managed buildings. This information will be entered in an automated
maintenance program database and will be used to develop a written maintenance program
for the building systems which should be operational by 6130196.
The Building and Planning Services Section has undertaken the design of a major building
components database in conjunction with the building renewal program that will identify
the date of last major maintenance. This will be utilized to track building data, major
maintenance costs and dates which will then allow the projection of needed periodic major
maintenance in lieu of corrected situations, only after they have failed. The system will be
completed by 6130196.
B. "... pays too much and receives too little for custodial services. .."
ADOA strives to improve its performance in this area. According to a recent customer survey, the
level of customer satisfaction has improved. Staff shortages continue to be a problem. However,
Tenant Senices has used inmate labor to help alleviate the problem.
Tenant Services has also created and partially implemented a detailed work sheet to track the
anticipated and actual costs for custodial services. The worksheet tracks supply and labor costs for
each DOA managed building in the Capitol Complex. These also help track the workload per
custodian. The work order system is in operation and has helped improve our response time for
emergency and other special services. The data is being tracked and a system to produce a detailed
accounting of these costs will be in place by 4130196 in accordance with our internal management
objectives.
The Auditor General's recommendation to privatize the custodial services did not take into account
all services currently being performed by our staff, such as carpet maintenance, garage cleaning,
hard floor maintenance, window cleaning, etc. Also, in our 8/ 16/ 94 response, we noted that the
square footage maintained by each employee was understated in the Auditor General report.
The reported cost savings of $ 900,000 per year noted in the report is excessive. ADOA believes
the figure to be closer to $ 180,000 based on information compiled during an extensive survey
conducted by Service Masters ( private contractor). This company maintained that they could not
compete with the per square footage cost, labor cost and benefit package offered by the state.
Accordingly, ADOA has not further pursued the use of private contractors for custodial services.
C. "... does not link its rental rates to the cost of operating its buildings ..."
Beginning in FY96, the General Services Division will start to track all pertinent expenditures in
the Tenant Services, Building Planning Services and Construction Services by building location.
An automated tracking system, which is presently being implemented, will compile the expense
data and history for each building identified. Expense data will include: labor, equipment,
operating, maintenance, supplies, materials, parts, contracts and major capital renovations. This
information may then be utilized to determine precise operating expenses for buildings based upon
identified levels of service. Rental rates will then be based upon actual expenses and not simply be
comparative to private sector lease rates, as has been done to date, by the Lease Cost Review
Board.
D. "... management of the State's vehicle fleet is fragmented ... taxi fleet is
often not used cost- effectively ..."
As noted in the Auditor General's report, there are several state agencies that are exempted from the
state motor vehicle fleet per ARS 41- 803 E. As a result, management of the state's vehicle fleet
will continue to be " fragmented" until a statutory change is made.
Notwithstanding, ADOA is continuing its efforts to manage its vehicle fleet in the most cost
effective manner. To this end, the Directors of both ADOA and ADOT entered into an interagency
agreement in June, 1995, regarding the maintenance and repair of its combined fleets. As a result,
ADOA outsourced all of its preventative maintenance and repair services to ADOT and transferred
the ADOA staff of its former repair facility to ADOT.
Additionally, ADOT and ADOA have agreed in principle to a common fuel site at the Capitol Mall
area. ADOA alternatively fueled vehicles are fueled at an ADOT facility. Architectural plans have
been developed for a joint fueling site.
ADOA has also sought to control the inappropriate use of taxi vehicles through financial incentives
rather than denying service to any given user. As a result, the ADOA taxi rates were increased and
a minimum mileage was put in place to provide an incentive for better utilization of the taxi fleet.
Presently, the minimum mileage rate is 50 miles per day.

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PERFORMANCE AUDIT
DEPARTMENT OF ADMINISTRATION
SUNSET FACTORS
Report to the Arizona Legislature
By the Auditor General
November 1995
Report # 95- 12
DOUGLAS R. NORTON, CPA
AUDITOR GENERAL
STATE OF ARIZONA
OFFICE OF THE
AUDITOR GENERAL
November 15,1995
DEBRA K. DAVENPORT, CPA
DEPUTY AUDITOR O E N E I I I
Members of the Arizona Legislature
The Honorable Fife Symington, Governor
Mr. Rudy Serino, Director
Arizona Department of Administration
Transmitted herewith are the Sunset Factors for the Department of Administration. This
report summarizes and presents information from the six performance audits conducted on
the Department along with specific information provided by the Department These factors
are presented in response to the requirements of A. R. S. 541- 2954, which direct the
Legislature to consider whether the Department of Administration should be continued or
terminated.
My staff and I will be pleased to discuss or clarify items in the report
Tlus report will be released to the public on November 16, 1995.
Sincerely,
f*?~!!! D ugl s . Norton
Enclosure
2910 NORTH 44TH STREET . SUITE 410 . PHOENIX, ARIZONA 85018 ( 602) 553- 0333 FAX ( 602) 553- 0051
Table of Contents
Paqe
Introduction and Background ............................................................. 1
Sunset Factors ................................................................................. 5
Agency Response
INTRODUCTION AND BACKGROUND
The Office of the Auditor General has prepared sunset factors for the Department of Ad-ministration
( DOA) in response to a December 13,1991, resolution of the Joint Legislative
Oversight Committee, and a May 5,1993, resolution of the Joint Legislative Audit Com-mittee.
These sunset factors were prepared as a part of the sunset review set forth in
Arizona Revised Statutes ( A. R. S.) 5541- 2951 through 41- 2957.
The Department of Administration was established in 1972 for the purpose of providing
centralized support services to state government. The 1972 legislation merged the De-partment
of Library and Archives, the Department of Public Building Maintenance, the
Department of Finance, the State Surplus Property Agency, the State Personnel Commis-sion,
the Board of History and Archives, and the Historical Advisory Commission into
one agency - the DOA. Although the DOA has been reorganized over the years, the
types of centralized services it provides have remained relatively consistent.
Organization
Today, the DOA provides support services in the areas of automation, finance, personnel
administration, public buildings maintenance, surplus property, and risk management.
Under the direction of a director and deputy director, the DOA is currently organized
into five divisions:
General Services Division - This Division's major responsibilities include manag-ing
and maintaining state- owned buildings, operating the State's print shop, fleet
management office, and surplus property program, and providing design and con-struction
services for state construction projects.
Information Services Division - This Division operates an Information Processing
Center that provides operations support to state agencies that use mainframe and mini-computers.
It also designs and develops computer applications and tracks trends and
opportunities in new technologies. This Division is also responsible for coordinating
statewide information technology and telecommunications.
Financial Services Division - This Division has several diverse responsibilities in-cluding
maintaining the statewide automated financial system, conducting and main-taining
statewide payroll, developing and maintaining statewide procurement poli-cies
and procedures, and providing procurement services. In addition, the Division
administers the State's risk management program.
W Personnel Services Division - This Division provides personnel management and
consultation services through on- site personnel offices at some larger agencies and
serves the remaining 86 state agencies at its Capitol Mall Personnel Office ( CA. M. P.).
It also administers the State's employee benefit plans, and recruits, evaluates, and
refers job candidates to state agencies for employment consideration.
W Management Services Division - This Division provides accounting and purchas-ing
services for the DOA. It is also responsible for preparing the DOA's annual budget
request, and monitoring this budget. Further responsibilities include administering
the travel reduction and rideshare programs, operating the Arizona Office for Ameri-cans
with Disabilities, and assisting the Governor's Regulatory Review Council.
Staffing and Budget
The DOA has nearly 1,100 full- time equivalent ( FTE) positions to provide the services
outlined above. In fiscal year 1995, the DOA received an estimated $ 348,039,800 from
both appropriated and nonappropriated funds. Only a small percentage of the DOA's
annual funding, approximately 7 percent, comes from General Fund appropriations.
Additional revenue, approximately 25 percent, is from other appropriated funds such as
the Personnel Fund, the Risk Management Revolving Fund, and the Automation Fund.
Finally, the DOA receives approximately 68 percent of its funding from nonappropriated
funds. The DOA has 14 nonappropriated funds which include, among others, the Motor
Pool Revolving Fund, the Special Employee Health Insurance Trust Fund, the Surplus
Property Fund, and the Telecommunications Fund.
Scope of Current Audits
The current series of audits was conducted as a sunset review of the Department of Ad-ministration
under the direction of the former Joint Legislative Oversight Committee and
the Joint Legislative Audit Committee. The following five reports discuss the six audits
that were completed as a part of this review.
W The Personnel Division ( Performance Audit Report 93- 6) - This report focuses on
the services provided by the Department's Personnel Division. Our review identified
numerous problems with the manner in which personnel services are provided. In the
most important service areas - hiring, classification, compensation, and benefits -
our report indicated that Arizona's current personnel system does not respond to its
users' needs, and must be reformed.
The Building and Planning Services Section and Construction Services Section ( Per-formance
Audit Report 93- 9) - This report centers on two sections within the General
Services Division. These two sections provide several building oversight, planning,
and construction management services. Our review found that a lack of funding and
inefficient management have rendered many state buildings in need of major repair.
Further, our review identified the need for the DOA to improve services to agencies
involved in relocations.
H The General Services Division ( Performance Audit Report 94- 5) - This report con-tains
information from two separate audits that were combined for reporting pur-poses.
This audit reviews the Tenant Services Office and the Fleet Management Office
( Motor Pool) within the General Services Division. Although the DOA serves directly
as the property manager for $ 177 million worth of property, it has almost no preven-tative
maintenance programs. DOA also pays too much and receives too little for cus-todial
services. Finally, DOA does not link its rental rates to the cost of operating its
buildings.
Our work in the Fleet Management Office identified that management of the state
vehicle fleet is fragmented. Over 80 percent of the State's vehicle fleet is outside of
DOA's control. In addition, the taxi fleet is often not used cost- effectively.
H The Financial Services Division ( Performance Audit Report 95- 11) - This report
reviews the General Accounting Office, and the Risk Management Section.(') Our re-view
of the General Accounting Office found that because of inadequacies with the
uniform statewide accounting system ( USAS), public monies are vulnerable to impro-prieties.
Moreover, USAS currently does not meet Arizona's financial management
needs. Further, the report identified the need for a Chief Financial Officer to ensure
strong financial management in the State. Our review of the Risk Management Section's
Property and Liability Unit identified numerous claims management problems that
expose the State to unnecessary expenditures and limit the Risk Management Section's
ability to adequately safeguard state monies set aside for the risk management pro-gram.
Further, our report identified the need for the Risk Management Section to pro-vide
agencies with stronger incentives to control loss costs and exposures through the
use of deductibles and premium credits.
H The Information Services Division ( Performance Audit Report 95- 9) - This report
focuses on the DOA's Information Services Division ( ISD). Our review indicated that
despite spending nearly $ 200 million annually on information resources, Arizona has
no central authority managing this important investment. Further, the State does not
invest in technology resources with statewide priorities, benefits, and long- term costs
in mind. Specific to ISD's operational effectiveness, ISD has made limited efforts to
(') We did not review the State Procurement Office ( SPO). During our audit the SPO had completed a
study of its operations that recommends substantial change to its processes. Given the magnitude of
expected changes in that Office, we did not believe it would be cost- effective to conduct a review at
this time.
provide newer technology services to its customers due to its dependence on older
technology revenues ( i. e., fees generated from use of mainframe computers). Finally,
ISD's services lack a customer focus and are inadequately planned.
This report addresses the 12 statutory sunset factors. In addressing these factors, we use
information from the current series of audits as well as information provided by the De-partment.
This information is summarized and presented in the various sunset factors, as
appropriate.
This audit was conducted in accordance with government auditing standards.
The Auditor General and staff express appreciation to the Director and staff of the De-partment
of Administration for their cooperation and assistance throughout all the au-dits.
FACTORS
In accordance with A. R. S. 541- 2954! the Legislature should consider the following 12 fac-tors
in determining whether the Department of Administration should be continued or
terminated.
1. The objective and purpose in establishing the Department.
The Department of Administration ( DOA) was created by the Legislature in 1972
per A. R. S. 541- 701 by merging seven previously established agencies to provide
more centralized support services to state government. Some of the original ser-vices
provided by the DOA, such as library and archives, have since been removed.
Additionally, services such as risk management and automation have subsequently
been added. Currently, as stated in statute, the DOA provides support services in
the areas of automation, finance, personnel administration, public buildings main-tenance,
surplus property, and risk management. While the type of services of-fered
has remained fairly consistent, the DOA has recently changed its focus. De-partment
officials state the DOA " has evolved from a control focused organization
to one that is customer- service driven." This change is reflected in the DOA's cur-rent
vision, mission, and values statements. For example, the DOA mission state-ment
reads:
" To provide high quality support services to governnzent agencies, the public,
and state enlployees to enhance our customers' ability to achieve their goals."
2. The effectiveness with which the Department has met its objective and purpose
and the efficiency with which it has operated.
The Department measures its effectiveness and efficiency by conducting customer
satisfaction surveys, and by using performance standards, benchmarks, and cost
comparisons. The DOA feels, in large part, that it has been successful in meeting its
objectives. For example, in 1994 the DOA issued a customer satisfaction survey
focusing on 70 services it provides to state agencies. Respondents of this survey
indicated that with the exception of one activity ( Flag Administration), all of the 70
services were important. However, respondents further indicated they were dis-satisfied
with 20 of the 70 services, suggesting room for further improvement.
DOA states that financial resource issues such as lagging pay rates, lack of funding
in automation, and physical plant limitations have adversely impacted its efficiency.
Our reviews also identify several areas where the DOA can improve its effective-ness
and efficiency in fulfilling its statutory responsibilities. For example:
Our audit work in the Personnel Division indicated that the Department falls
far short in fulfilling its responsibilities in the areas of hiring, classification,
compensation, and benefits ( Performance Audit Report 93- 6).
Our review of the Building and Planning Services and Construction Services
Sections indicated that a lack of funding and inefficient management have ren-dered
many state buildings in need of major repairs and that the DOA can
improve its handling of agency relocations ( Performance Audit Report 93- 9).
Our review of the General Services Division found that although the DOA serves
directly as the property manager for $ 177 million worth of property, it has al-most
no preventative maintenance programs, pays too much and receives too
little for custodial services, and does not link its rental rates to the cost of oper-ating
its buildings. Our work also indicated that management of the State's
vehicle fleet is fragmented and the taxi fleet is often not used cost- effectively
( Performance Audit Report 94- 5).
In our most recent audits the need for strong financial management, improved
property and liability claims management, and statewide direction over infor-mation
technology expenditures was identified ( Performance Audit Reports
95- 11, and 95- 9).
The extent to which the Department has operated within the public interest.
Although the Department's operations primarily affect state agencies and employ-ees,
some areas such as personnel administration, public building maintenance,
risk management, and procurement can indirectly impact the general public. For
example, if rendered properly, the DOA operates in the public's interest by per-forming
the following functions:
Hiring qualified personnel who in many instances provide direct services to
taxpayers;
Maintaining the State's buildings and grounds;
Providing risk management services designed to prevent or reduce losses; and
Achieving savings through cost- effective procurement of goods and services.
4. The extent to which rules and regulations promulgated by the Department are
consistent with the legislative mandate.
The DOA feels it has sufficient authority to promulgate rules and regulations. Fur-ther,
it believes that all the necessary rules have been promulgated with the excep-tion
of some automation rules which are in process. The DOA states that it is cur-rently
developing several information resource management ( IRM) policies and
technology standards. However, to ensure the DOA's rules and regulations are
consistent with the legislative mandate, our reviews suggest the need to revise or
develop additional rules in the following areas:
W The Risk Management Section ( RMS) should consider increasing its use of
deductibles and implementing premium credits to help increase agencies' ef-forts
to control loss costs and exposures. The State currently has a $ 100 disap-pearing
deductible.(') If the RMS increases the amount of the deductible, it would
need to revise rule R2- 10- 106 ( Audit Report 95- 11); and
The DOA Personnel Division should begin a comprehensive reform of the
state hiring system, including redrafting the personnel rules. Our report states
major rule revision is needed because some of these rules limit the State's abil-ity
to respond creatively to its diverse hiring needs. For example, the personnel
rules require that applicants must be state residents and hiring lists are limited
to seven candidates ( Performance Audit Report 93- 6).
While the DOA has made several changes to its personnel rules, these changes are
not extensive enough to address the concerns noted in our report. For example,
the DOA has revised at least 17 rules since July 1994. However, these revisions
deal with issues such as including parents in the family group for which an em-ployee
may use accrued sick leave, lowering the number of hours of suspension
for which a grievance can be filed, and broadening the categories of " relative" for
which an employee may take bereavement leave. These rule revisions, although
most assuredly important, do not consider the more significant issue of allowing
agencies the flexibility to respond to their diverse hiring needs.
Under the $ 100 disappearing " deductible," the agency covers any property losses up to $ 100. When
a loss exceeds $ 100 ( even $ 101), the deductible disappears and the RMS pays for the entire claim.
7
5. The extent to which the Department has encouraged input from the public be-fore
promulgating its rules and regulations and the extent to which it has in-formed
the public as to its actions and their expected impact on the public.
Documentation provided by the DOA shows that it informs the public of its pro-posed
rules by filing notice with the Secretary of State, publishing a notice in the
Arizona Administrative Register, sending copies of proposed rules to all agency heads,
and holding public hearings at various locations throughout the State. Further, the
DOA communicates its activities through various publications, such as quarterly
newsletters and pamphlets. For example, the Information Services Division pub-lishes
a quarterly newsletter - Info Trends, and the Management Services Division
publishes pamphlets on Capitol Rideshare.
6. The extent to which the Department has been able to investigate and resolve
complaints that are within its jurisdiction.
Because the DOA is not a regulatory agency, this factor does not apply.
7. The extent to which the Attorney General or any other applicable agency of
state government has the authority to prosecute actions under enabling legisla-tion.
This factor does not apply to the DOA because it is not a regulatory agency.
8. The extent to which the Department has addressed deficiencies in the enabling
statutes which prevent it from fulfilling its statutory mandate.
The DOA has proposed approximately 24 pieces of legislation over the last 5 years.
For example, the Department has proposed legislation dealing with flexible work
hours, health insurance premiums, risk management insurance, state employees'
travel authorizations, and procurement evaluator disclosure statements. Examples
of recently enacted legislation include:
SB 1033 - Public Employees - Out- of- State Travel - Policies and Procedures
( 1994). This legislation amends A. R. S. 538- 626 allowing agency heads or uni-versity
presidents to countersign out- of- state travel orders rather than the Gov-ernor.
It also directs the DOA to adopt policies and procedures dealing with
the approval of out- of- state travel orders, and to disseminate and perform com-pliance
reviews of these policies.
SB 1156 - Arizona Procurement - Less Than $ 10,000, Construction Contract
Exemption, and Simplified Construction Procurement Program - Effective
Dates ( 1995). This 1995 legislation extends the applicability of laws 1993, Chap-ter
135, section 7 and 8 until 1997. Prior to the 1993 legislation, all procurements
in excess of $ 10,000 required formal bidding procedures. Currently, the thresh-old
is $ 25,000.
9. The extent to which changes are necessary in the laws of the Department to
adequately comply with the factors listed in the sunset laws.
The DOA does not believe any changes in its laws are necessary. However, our
reviews found the following statutory changes are needed to achieve a more effec-tive
hiring system:
The DOA may need to revise A. R. S. 541- 783.5 to allow it the ability to list can-didates
for state employment ( when it is more efficient or valid) as either " quali-fied
or " unqualified" rather than " in order of relative excellence."
The DOA may need to revise A. R. S. 538- 492 which requires the awarding of
preference points to veterans and handicapped candidates. This statute may be
adversely impacting State Affirmative Action goals and workforce diversity by
causing many hiring lists to be dominated by veterans.
Finally, additional legislation is needed to ensure the Personnel Board is subject to
a sunset review. During our review of the DOA Personnel Division, it was discov-ered
that the State Personnel Board was not encompassed in the DOA's sunset
review because it is a separate agency from the DOA. It was also learned, however,
that the Personnel Board, which hears and reviews appeals relating to personnel
actions, does not have a sunset date. Because the Personnel Board plays an impor-tant
role in the State's personnel system by hearing appeals of disciplinary actions,
additional legislation is needed to ensure this board is reviewed in the future.
10. The extent to which the termination of the Department would significantly harm
the public health, safety or welfare.
Termination of the Department could harm state employees and the public due to
the disruption of the many centralized services the DOA provides. For example,
state employees and vendors would not be paid, many of the State's buildings and
grounds would not be cleaned or maintained, and the State would be without
property, liability, and workers' compensation insurance. While many of the DOA's
functions could be performed separately by each agency, it may not be efficient or
cost- effective to operate in that manner.
11. The extent to which the level of regulation exercised by the Department is ap-propriate
and whether less or more stringent levels of regulation would be ap-propriate.
Because the DOA is not a regulatory agency this factor is not applicable.
12. The extent to which the Department has used private contractors in the peifor-mance
of its duties and how effective use of private contractors could be ac-complished.
The DOA utilizes private contractors in some areas as it believes certain private
sector services are more cost- effective. For example, it contracts with private ven-dors
for certain automotive repairs, specialized claims adjusting needs, and for
consulting in employee compensation and benefits. Because the private sector of-fers
many comparable services, the DOA will need to continuously assess the cost-effectiveness
of these outside services. For example, in the DOA General Services
audit, our review found the DOA could save nearly $ 700,000 annually by contract-ing
with the private sector for custodial services alone. The DOA is currently study-ing
this recommendation. Additionally, our Information Services Division ( ISD)
Report recommends that ISD analyze the economic viability of the services it pro-vides
and consider the possibility of outsourcing some services to the private sec-tor.
Agency Response
I FIFE SYMINGTON
Governor m
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RUDY SERJNO
Director
ARIZONA DEPARTMENT OF ADMINISTRATION
OFFICE OF THE DIRECTOR
1700 WEST WASHINGTON ROOM 601
PHOENIX, ARIZONA 85007
October 30, 1995
Mr. Douglas Norton
Auditor General
2910 N. 44th Street, Suite 410
Phoenix, Arizona 85018
Dear Mr. Norton:
We have received the October 4, 1995, draft sunset audit of
the Department of Administration and have reviewed your
comments with interest.
We are taking this opportunity to provide you with an update
regarding progress and activities in the areas of General
Services ( 93- 9 and 94- 5) as well as Human Resources ( formerly
Personnel, 93- 6).
On behalf of our agency, I would like to thank you for your
cooperation during these audits.
Sincerely,
Rudy Serino
Director
Enclosures
ENCLOSURE A
I. Human Resources Section ( 93- 6)
AUDITOR GENERAL COMMENTS:
" Our audit work in the Personnel Division indicated that the Department falls far short in fulfilling
its responsibilities in the areas of hiring, classification, compensation, and benefits."
ADOA RESPONSE:
One of our first steps was the completion of a five- year strategic plan which was used as a guide in
making some of the changes we have implemented, including changes in the hiring system,
classification, compensation, and benefits areas. The changes implemented over the past two years
include:
A. Hiring
The successful partnering relationships with six agencies for staffing and employment
functions. These partnerships formed the basis for open communication and involvement
by agencies to a greater extent than before, as well as providing the Division with important
lessons in the development of our new hiring process.
The establishment of a Job Service link to improve communication and provide applicants
with better access to the state service system through the services and resources of the
Department of Economic Security's Job Service Offices statewide.
The development of a method for applicants to file for multiple jobs on a single application
form, a change from the previous requirement for an application for each position.
The significant reduction of turnaround time for production of hiring lists.
B . Classification
The classification project is well underway and will result in the recommended
implementation of a new classification system for state service. The development of
classification descriptions is almost completed, the external market survey has been
completed and funding and implementation options are being developed. The report and
recommendation will be included in the Annual Recommendation to the Legislature on
1213 1195.
C . Compensation
The implementation of changes suggested by the Auditor General and others in last year's
Annual Recommendation, including an expanded information base, comparison of the
average state salary to the market, employee distribution by grade, total compensation, and
a state compensation philosophy.
• The expansion of the Joint Governmental Salary Survey ( JGSS) to include more state jobs
and more survey participants to provide broader scope and a broader base.
D. Benefits
• The formulation of the Employee Benefits Advisory Committee ( EBAC) was in the early
stages of development two years age. Since that time, the EBAC has met monthly and has
taken an active role in helping us formulate the state's benefits package.
• The provision of the opportunity to review and comment on proposals for new or enhanced
benefits to the legislative benefits Oversight Committee.
• The monitoring of claims experience for all carriers and continuous seeking of employee
input on their satisfaction level through Pulse Taker surveys.
• The installation of Benefits Information Tracking System ( BITS), allowing us to track and
monitor employee participation and reduce unnecessary losses to the state.
• The mailing of an annual benefits statement to each employee. The first statement was
issued in early 1994, the second in early 1995, and we plan to continue providing
employees with this important information.
a The issuance of a monthly newsletter, For Your Health and Benefit, to all employees.
AUDITOR GENERAL COMMENTS:
". . . To ensure the DOA's rules and regulations are consistent with the legislative mandate, our
reviews suggest the need to revise or develop additional rules in the following areas:
The DOA Personnel Division should begin a comprehensive reform of the state hiring system,
including redrafting the personnel rules. Our report states major rule revision is needed because
some of these rules limit the State's ability to respond creatively to its diverse hiring needs. For
example, the personnel rules require that applicants must be state residents and hiring lists are
limited to seven candidates.
While the DOA has made several changes to its personnel rules, these changes are not extensive
enough to address the concerns noted in our report. For example, the DOA has revised at least 17
rules since July 1994. However, these revisions deal with issues such as including parents in the
family group for which an employee may use accrued sick leave, lowering the number of hours of
suspension for which a grievance can be filed, and broadening the categories of " relative" for
which an employee may take bereavement leave. These rule revisions, although most assuredly
important, do not consider the more significant issue of allowing agencies the flexibility to respond
to their diverse hiring needs."
ADOA RESPONSE:
The Auditor General recommended certain changes to the Personnel Rules, addressed below:
• Rule R2- 5- 303: The requirement that the salaries of current employees " performing in the
same job class" be raised when an employee received a special entrance rate or special
promotion rate was removed, effective September 15, 1994.
The Personnel Rules applicable to the three issues listed below, along with other rules
applicable to employment issues, are under review and will be part of a future package of
rule changes anticipated for submission in early 1996.
- Rule R2- 5- 203. B. ( residency requirement): The State Service system was designed
to provide employment opportunities for Arizona residents. However, residency
waivers have been and continue to be granted upon agency request.
- Rule R2- 5- 204 ( registers): The decision whether to fill a vacant position through an
internal promotion or outside recruitment is a decision that can be made at the
supervisor, management or agency head level. Some agencies have opted to
develop and use internal registers because it was felt such registers would provide
faster recruitment. When internal promotions are handled under the Resumix
system, internal promotional lists will be provided as quickly as external lists
( within three working days).
- Rule R2- 5- 205 ( certification and selection): As a result of Resumix, the seven
candidate limit has been expanded.
• Rule R2- 5- 304 ( examinations): Human Resources partnered with state agencies to provide
delegated authority for a wide range of employment functions, based on the agency's
ability to staff the functions, including candidate evaluations. Other candidate evaluations
are permitted as long as such evaluations are job related and meet the Uniform Guidelines.
No rule change is considered necessary in this area.
The Auditor General also recommended two statutory changes, addressed below:
A. R. S. 41- 783.5, requiring the listing of candidates in order of relative qualifications: The
Auditor General recommended that an option of issuing lists indicating candidates were
" qualified" or " unqualified" be available. We do not see the advantage of or need to include
" unqualified" candidates on hiring lists. Under Resumix, we provide lists of candidates in
order of relative qualifications under the criteria defined by the hiring agency. The system
allows hiring supervisors the flexibility of defining " the ideal candidate" from a pool of
qualified candidates.
a A. R. S. 38- 492, awarding of preference points to veterans and handicapped candidates:
With respect to the possible negative impact on Affirmative Action, we have not found that
the application of these preference points has had such an impact. Under Resumix, we
continue to apply veterans' and handicapped preference points. Should there be further
desire to explore changing the statutory requirements for application of preference points,
we feel that this public policy issue should be addressed by the legislative body.
ENCLOSURE B
I. The Building and Planning Services Section and Construction Services
Section ( Performance Audit Report 93- 9):
AUDITOR GENERAL COMMENTS:
" This report centers on two sections within the General Services Division. These two sections
provide several building oversight, planning and construction management services. Our review
found that a lack of funding and inefficient management have rendered many state buildings in
need of major repair. Further, our review identified the need for the DOA to improve services to
agencies involved in relocations."
ADOA RESPONSE:
A. "... a lack of funding and inefficient management have rendered many state
buildings in need of major repair ..."
ADOA has made the need for full funding of the Building Renewal Program for the ADOA
Building System a high priority. In fact, this issue has been placed as the # 1 priority in the State
Capital Improvement Plan for the last five years and major education efforts have been made to
JLBC and OSPB budget staffs. The results have been a significant increase in program
appropriations for the past three years as evidenced below:
In an effort to improve the management of the building system, the Building and Planning Services
Section has reorganized to include building inspections, construction contract review and the
building renewal program management. Additionally, we have categorized the building needs into
six major areas for funding allocations from the building renewal program. These major areas, in
order of importance are:
Fire and life safety issues
Building roofing and weatherproofing
Projects critical to continued operations and code compliance
Projects that reduce operating costs
Building finishes
Other
All agency building renewal project requests are evaluated based upon its level of importance with
respect to the six major prioritized categories. This new management philosophy stresses the need
to provide safety, maintain weatherized facilities, replacelrepair deteriorated facility components,
correct code deficiencies, reduce operating costs where economically feasible, provide attractive
facilities and arrange to quickly deal with emergencies as they arise. This allows ADOA to utilize
the annual Building Renewal appropriation in the best manner possible, regardless of funding
levels. JLBC and OSPB have both endorsed this approach.
Since the receipt of the Auditor General's Report 93- 9, the Building and Planning Services Section
has maintained all building renewal projects in a database by agency, amount and facility so that
future requests could be reviewed with respect to past projects. This is a continuous process and
the project status is updated monthly. A project folder is established for each building renewal
project and progress reports are requested from agencies on a quarterly basis until the project is
completed. This information is shared with OSPB and JLBC quarterly.
ADOA building inspectors are instructed to inspect ADOA building system facilities with the intent
of identifying deficiencies and solutions. All building inspections are sent to the respective
agencies with a recommendation for correction. The building inspection form has been modified to
include the identification of building renewal needs. Additionally, copies of the inspection reports
are reviewed and maintained by the Building and Planning Services staff to assist in the
determination of building renewal allocations.
When building renewal project requests are reviewed, a building inspector may be used to perform
a current evaluation of an agency's request, if current information is not informative.
B. " ... DOA to improve services to agencies involved in relocations ..."
The Building and Planning Services Section has undertaken an aggressive customer service
approach to agency relocations. An up front personal contact is made with each agency to asses
the feasibility of the move, responsibilities, coordination and move dates. A checklist has been
revised for better coordination and understanding by the agencies. Continuous communications
with the agency officials is maintained by this section. After the move is completed, a survey is
done to evaluate the customer's satisfaction and the performance of the ADOA staff. Each survey
is reviewed for items that can be improved upon and implemented in the relocation program.
11. The General Services Division ( Performance Audit 94- 5)
AUDITOR GENERAL COMMENTS:
" This report contains information from two separate audits that were combined for reporting
purposes. This audit reviews the Tenant Services Office and the Fleet Management Office ( Motor
Pool) within the General Services Division. Although the DOA serves directly as the property
manager for $ 177 million worth of property, it has almost no preventative maintenance programs.
DOA also pays too much and receives too little for custodial services. Finally, DOA does not link
its rental rates to the cost of operating its buildings.
Our work in the Fleet Management Office identified that management of the state vehicle fleet is
fragmented. Over 80% of the State's vehicle fleet is outside of DOA's control. In addition, the
taxi fleet is often not used cost- effectively."
ADOA RESPONSE:
A. "... DOA has almost no preventative maintenance programs ..."
The Department realizes the necessity of having preventative maintenance programs and has begun
efforts to implement them. A Pilot Preventative Maintenance Program for buildings within the
Capitol Complex was developed but funding for the pilot was denied in the FY96 budget.
Therefore, the pilot has not yet begun. DOA is currently performing some preventative
maintenance on the equipment and buildings within the existing budget and staffing levels. Our
efforts to implement preventative maintenance programs for the state's buildings and equipment
include:
The Maintenance Unit is currently performing preventative maintenance on emergency and
major safety systems. However, it should be noted that the funding and manpower are not
available to perform additional preventative maintenance to meet manufacturer's, state
inspectors' or federal specifications.
a The Maintenance Unit implemented an inventory program to identify all electrical panels,
sump pumps, and emergency generators installed in the ADOA managed buildings. The
inventory of the plumbing fixtures, light fixtures, sprinkler systems and other systems will
be completed by 61301' 96.
a The Maintenance Unit is in the final stages of implementing a comprehensive work order
system that will track the completed preventative maintenance, labor costs and equipment
costs incurred. This system will be compled by 6130196. The current work order system is
not sophisticated enough to track this information. . The HVAC Unit is in the process of identifying all the HVAC systems and equipment
installed in the DOA- managed buildings. This information will be entered in an automated
maintenance program database and will be used to develop a written maintenance program
for the building systems which should be operational by 6130196.
The Building and Planning Services Section has undertaken the design of a major building
components database in conjunction with the building renewal program that will identify
the date of last major maintenance. This will be utilized to track building data, major
maintenance costs and dates which will then allow the projection of needed periodic major
maintenance in lieu of corrected situations, only after they have failed. The system will be
completed by 6130196.
B. "... pays too much and receives too little for custodial services. .."
ADOA strives to improve its performance in this area. According to a recent customer survey, the
level of customer satisfaction has improved. Staff shortages continue to be a problem. However,
Tenant Senices has used inmate labor to help alleviate the problem.
Tenant Services has also created and partially implemented a detailed work sheet to track the
anticipated and actual costs for custodial services. The worksheet tracks supply and labor costs for
each DOA managed building in the Capitol Complex. These also help track the workload per
custodian. The work order system is in operation and has helped improve our response time for
emergency and other special services. The data is being tracked and a system to produce a detailed
accounting of these costs will be in place by 4130196 in accordance with our internal management
objectives.
The Auditor General's recommendation to privatize the custodial services did not take into account
all services currently being performed by our staff, such as carpet maintenance, garage cleaning,
hard floor maintenance, window cleaning, etc. Also, in our 8/ 16/ 94 response, we noted that the
square footage maintained by each employee was understated in the Auditor General report.
The reported cost savings of $ 900,000 per year noted in the report is excessive. ADOA believes
the figure to be closer to $ 180,000 based on information compiled during an extensive survey
conducted by Service Masters ( private contractor). This company maintained that they could not
compete with the per square footage cost, labor cost and benefit package offered by the state.
Accordingly, ADOA has not further pursued the use of private contractors for custodial services.
C. "... does not link its rental rates to the cost of operating its buildings ..."
Beginning in FY96, the General Services Division will start to track all pertinent expenditures in
the Tenant Services, Building Planning Services and Construction Services by building location.
An automated tracking system, which is presently being implemented, will compile the expense
data and history for each building identified. Expense data will include: labor, equipment,
operating, maintenance, supplies, materials, parts, contracts and major capital renovations. This
information may then be utilized to determine precise operating expenses for buildings based upon
identified levels of service. Rental rates will then be based upon actual expenses and not simply be
comparative to private sector lease rates, as has been done to date, by the Lease Cost Review
Board.
D. "... management of the State's vehicle fleet is fragmented ... taxi fleet is
often not used cost- effectively ..."
As noted in the Auditor General's report, there are several state agencies that are exempted from the
state motor vehicle fleet per ARS 41- 803 E. As a result, management of the state's vehicle fleet
will continue to be " fragmented" until a statutory change is made.
Notwithstanding, ADOA is continuing its efforts to manage its vehicle fleet in the most cost
effective manner. To this end, the Directors of both ADOA and ADOT entered into an interagency
agreement in June, 1995, regarding the maintenance and repair of its combined fleets. As a result,
ADOA outsourced all of its preventative maintenance and repair services to ADOT and transferred
the ADOA staff of its former repair facility to ADOT.
Additionally, ADOT and ADOA have agreed in principle to a common fuel site at the Capitol Mall
area. ADOA alternatively fueled vehicles are fueled at an ADOT facility. Architectural plans have
been developed for a joint fueling site.
ADOA has also sought to control the inappropriate use of taxi vehicles through financial incentives
rather than denying service to any given user. As a result, the ADOA taxi rates were increased and
a minimum mileage was put in place to provide an incentive for better utilization of the taxi fleet.
Presently, the minimum mileage rate is 50 miles per day.